Update: Micron-Qimonda deal appears likely, analysts say

SAN FRANCISOMicron Technology Inc., long rumored to be working toward an acquisition of Qimonda AG's stake in Inotera Memories Inc., may now be on the verge of a deal to acquire more assets of the struggling Infineon Technologies spinoff, according to analysts.

According to Gregory Wong, an analyst at Forward Insights, Micron and Infineon have arrived at a basic agreement under which Micron would become the majority owner of Qimonda, giving Micron control not only of the stake in Inotera, a joint DRAM manufacturing venture between Qimonda and Taiwan's Nanya Technology Corp., but also Qimonda's manufacturing facilities in Germany, Taiwan and elsewhere.

Wong said he had no information on the price Micron will pay for Qimonda and that the agreement is awaiting final approval. He said he did not know when it may be finalized. He said Micron and Infineon have been in direct negotiations for about six weeks.

"The deal might not necessarily take the shape that people were expecting," said Doug Freeman, an analyst with American Technology Research, suggesting that the deal might involve more than Qimonda's stake in Inotera.

For Micron, acquiring Qimonda assets would be cheaper than investing in new capacity, Freedman said. He estimated that the cost of converting Qimonda fabs to Micron processes would be about $100 million versus the roughly $500 million that Micron has said it would invest in DRAM capacity in fiscal 2009, Freedman said.

Freedman said a deal could be done at a fraction of Qimonda's book valueperhaps $1 per sharebecause Qimonda cannot fund projected losses through fiscal 2009.

Infineon Technologies is believed to be trying to unload its 77 percent stake in Qimonda. Infineon has classified Qimonda as a discontinued operation since earlier this year and in July wrote down its value by 411 million euros (about $609 million).

"Infineon just wants out of the losses," Freedman said. "The faster they transfer the assets the cheaper it will be for them."

Freedman said an acquisition of Qimonda would position Micron (Boise, Idaho) as one of the two surviving memory leaders able to control supply and intellectual property (IP) as it waits for long-term demand drivers, like solid-state drives, to materialize. The other company, Samsung Electronic Co. Ltd., is looking to control the technology transfer of SanDisk IP through acquisition, he noted.